Established in 1996, the Virginia Cardiac Surgery Quality Initiative is a grass-roots, self-funded effort whose mission is to improve the quality of cardiac surgical care, contain healthcare costs, and test reimbursement methodologies that reward quality improvement. Composed of 16 hospitals and 10 cardiac surgery practices that together perform 99% of Virginia's open-heart procedures, it aims to demonstrate that an inclusive collaboration between hospitals and physicians would improve clinical outcomes through data-sharing, outcomes analysis and process improvement.
One of the primary goals of the Virginia Cardiac Surgery Quality Initiative, or VCSQI, was to demonstrate that focusing on quality will yield cost-containment results in cardiac surgical care through a reduction in complications, improved care efficiencies and reduced resource utilization.
In March 2000, armed with a unique database that measures the relationship between clinical and financial outcomes, the VCSQI was ready to test reimbursement methodologies that reward quality. That month, it submitted an application to the CMS for a demonstration project called Statewide Quality Focused Global Pricing for Cardiac Surgery. The three-year project was to combine Medicare Part A and Part B payments into a single, hospital-spe-cific global payment for cardiac-surgical DRGs, and would allow payment redistribution at the local level based on physician performance as measured by quality metrics.
The project offered shared benefits. It provided a method for physicians to remove themselves from the much-maligned resource-based relative value system and increase their reimbursement in a pay-for-performance methodology. There was the potential for the CMS to reduce financial risk, stabilize payments for costly procedures and reduce administrative costs through simplified billing. For hospitals, there was the possibility of increasing profitability by applying savings models aimed at reducing resource utilization while maintaining a focus on quality. Patients would benefit from statewide access to high-quality care and single copayments.
After receiving an initial denial letter from the CMS regarding the project, the VCSQI leadership engaged in an intense and successful lobbying effort in Washington. The project also was temporarily derailed when budget neutrality as defined by the Office of Management and Budget included a post-acute-care component that placed hospitals at risk for financial losses occurring beyond the hospitalization discharge DRG.
But an acceptable risk model was eventually developed and the project ultimately gained final approval from the CMS in November 2002, and the VCSQI's hospitals and physicians began intense implementation planning while it was under review by HHS' inspector general's office.
Meanwhile, the Institute of Medicine issued its report Crossing the Quality Chasm, which described the VCSQI's efforts to improve quality and align payment with quality improvement.
A major setback came in July 2004 when the inspector general said the project's payment incentive plans violated the Stark regulations and civil monetary menalty laws. Despite widespread support from HHS, the CMS and the state of Virginia, as well as parallel IOM directives, a project that appeared to have "all the right stuff" was dismantled by the federal agency least involved in healthcare.
Even more frustrating was a letter written in December 2004 by Medicare Payment Advisory Commission Chairman Glenn Hackbarth to Vice President Dick Cheney. In it, he seemed to describe the VCSQI model exactly when he named the global payment model as a solution to payment reform.
"Combining hospital and physician payments would make it possible for Medicare to reward good quality outcomes directly, and leave it to the participants to divide the reward among themselves," he wrote.
Recently, a group of hospitals in New Jersey proposed a very similar demonstration for a broader base of care delivery with incentive payments. They also were stopped by the inspector general. In addition, David Brailer, M.D., national coordinator for health information technology, had the inspector general halt a high-profile IT project in metropolitan Chicago on grounds of violating Stark regulations.
Red flags should be flying high for any private or government agency wishing to embark on pay-for-performance or any payment-reform methodology. It has become clear that without relief from the Stark and civil monetary penalty rules, it may be impossible to implement these programs.